Business growth, you’ve probably heard a lot about it. But how much do you really know? Is it scary? How much pain does it bring? How can you be prepared? Will it make me rich?
In this blog we want to give you as much insightful information to help you navigate what can be an exciting, yet tricky time.
Looking for signs of Business Growth in the right places
It is a misnomer to assume that growth is defined by an SME’s bottom line and sales figures. There’s so much more to the equation than that! Yes, profitability and sales are an integral aspect of growth, but so are other key success factors such as; employee retention and contentment.
In business, growth is both personal and professional.
The lead indicator of a successful SME is how the growth is achieved rather than the end result. It ought to be about taking the right actions and developing indicators that reflect your personal vision or goals. Whatever the path, if you cannot measure it, you cannot improve it!
So, what is business growth?
Business Growth is an important stage where your business reaches a junction for expansion. At this point, you will usually start to seek or be thinking about additional options to produce more revenue and profit.
Business growth is a product of industry growth patterns, the business lifecycle, and your desire for equity value creation.
Business growth capital is integral to scale up Australian SMEs.
Selecting the correct growth capital for your SME takes considerable market knowledge and experience. If you choose correctly, your growth trajectory will shoot upwards. Choose poorly, and your business might crash. Instead of squeezing your capital requirements into a pre-existing structure, design your own structure. This will help mitigate risk.
In business growth, resource availability is vital and usually requires an immediate investment. This is where things can get tricky, because ensuring that you select the right growth capital will depend on the following four variables:
- Cost of the capital – This is a required return which is absolutely necessary to allow a capital budgeting project feasible.
- The term structure of the capital – Capital structure is a combination of debt and equity used by a business to allow it to finance its overall operations and growth.
- Size of the capital – The amount of growth capital required to expand.
- The flexibility of the capital – How your bank or investor may request to be part of the decision making in exchange for funding.
These four variables need to be optimised to reach the best, or at the very least most favourable business growth capital equation. This is a big step in the growth of your business and one that will allow you to implement your strategy for growth.
What are some common business growth strategies?
1. Market Penetration.
Businesses can use market penetration when they decide to sell existing products in the same market. In other words, SMEs try to grow by using their current products. This is done to increase market share (the percentage a company has of total sales for a service or product).
2. Product diversification or development.
Businesses will often consider this strategy when they’re facing fierce and overwhelming competition and are unable to grow with their current product offerings. As a result, the business must search for new markets for its services and products, otherwise, it won’t be able to gain any profits.
3. Acquisition
Sometimes acquiring another company is a way of expanding your business’s operations.
A more recent example is when Disney purchased Marvel, Pixar, and Lucasfilm.
With the first three acquisitions, the Disney Company has earned over US$33.8 billion. In this example, the markets and products are already established.
Since business growth capital requires in-depth market and deal-making expertise, many SMEs hire an advisor to study and source the capital. However, the end result will be a business growth solution that is catered to your unique requirements and enables you to seamlessly scale up.
At the zenith, business growth is attained when every aspect of your business performs well. To achieve this feat, it is important to have a strategy or plan in place that is driven by your vision.
Ainsworth Accounting Solutions are here to help you with your growth strategies and we’d be happy to speak with you directly. Simply contact us today to take the next step to a bigger future!
